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“X” capital investors need to do a better job

mtargInvestors of all types need to do a better job of explaining to companies why they should take investment.  Here is part of an email I received today.

“What is the MVS Approach? The Minimum Viable Start-up (MVS) is a custom program developed by Roger Rappoport of Procopio, Brant Cooper (author of The Lean Entrepreneur) and Johnny Chan of eBoost Consulting, to help entrepreneurs take the leap from viable product to viable start-up and, along the way, avoid the most common mistakes made by entrepreneurs, which invariably leads to the same result-less upside for the founders on exit.
With the MVS methodology, the presenters will cover the four distinct milestones to help get your start-up on the road to success, including how to:
*       Generate your business model hypothesis;
*       Validate your business model;
*       Execute an effective beta launch; and
*       Test and scale your business model.
As an integral part of these milestones, entrepreneurs will need to develop and execute the right funding strategy, appropriate to each stage of a company’s development, build an appropriate financial model to present to investors, navigate around legal, fund raising and other issues, so as to avoid the most common pitfalls made by entrepreneurs, which can make a significant difference as to whether or not a company is fundable, the sources and types of capital that will be attracted, who controls the company, the economic impact on founders upon exit, and a company’s likelihood of success.”

The new trend is for companies to reduce as much or all of the risk so investors can take the same share and turn $1 into $20 for it’s partners.  The re-emergent trend is for investors to want traction, sales and customers.  There is NO R&D funding programs.  Investors want to put money on the table and have little or no direct interaction with the company while it grows using the funding.

The catch is this.  If you have revenue and it damages the valuation metrics for an investor, you will not get investment anyway.  So, what’s that game we are playing here?  You should simply know it’s a moving target and that investors are not here to help you in any meaningful way.  So, create a product that fits your passion, meets the market, and earns revenue.  If you find that you can’t scale on the revenue, take money only to accomplish that goal.  Today’s startups are playing in a world that is changing quickly, and the buy it on the cheap mentality is rampent.  So, don’t be a investment victim that ends up fundraising yourself into bankruptcy while your customers wait for your product.

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